Investment Opportunities in the Precious Metals Market
Nowadays, finding low-risk yet profitable investment opportunities can be like treading through a minefield without a map. The recession of 2008 really put a damper on what were once considered surefire opportunities, sending many investors searching for alternative options.
Precious metals investing has become that “diamond in the rough” opportunity offering a range of commodities that hold their value while appreciating over time.
The Precious Metals Market
Along with the well-known gold and silver metals, the precious metals market also includes the lesser known platinum and palladium metals. Gold and silver have a long-standing history as precious materials, currency and now investment commodities.
Platinum and palladium hold a smaller piece of the precious metals market, but they’re nonetheless worthwhile in terms of profit potential. According to Bankrate’s financial resource site, platinum and palladium have shown considerable increases in value over the past few years.
As all types of precious metals tend to move together in the marketplace regardless of market conditions, investors willing to hold onto their shares for three years or more should see decent returns; or at the very least, a value-holding investment during tough economic times.
Supply and Demand
While gold, silver, platinum and palladium may differ in value in the market, supply and demand factors almost always dictate the actual price a particular investment will bring at any given time. Supply and demand factors have to do with how a particular metal is used, any intrinsic value attached to it and its rarity or scarcity in supply overall.
So even though platinum is most expensive metal on the market, the demand for platinum materials can fluctuate from cycle to cycle. These fluctuations ultimately determine its price value within each market cycle. Prices for silver and palladium materials perform in much the same way. Gold, on the other hand is less so affected by market changes because of its scarcity, its history and the intrinsic value attached to gold metal.
Gold’s value as investments has a lot to do with its overall history through time. Originally held by kings and rulers as treasures, gold eventually took on the role of currency or money. This meant every piece of money was backed by its listed value in gold.
It wasn’t until the late seventeenth century when London eliminated the Gold Standard for backing its currency. Eventually, Great Britain, Switzerland, and many European countries followed suit by the 1920s and ‘30s. It wasn’t until the early 1970s that the United States opted to go off the Gold Standard as well. Less than decade after, dollar amounts for gold increased 23 times over, meaning the dollar plummeted in value while gold values remained intact.
While silver lacks the prestige that gold has, silver metals can hold their own in the marketplace; especially when demand for the metal is high. As investing in general operates on a global scale, other economically viable countries can have a considerable influence on the demand and market price for silver metals.
According to the Money Morning Financial News site, India investors view silver as an undervalued investment. As of 2012, India represents 12.2 percent of the global marketplace when it comes to the demand for silver. This may have something to do with the country’s history of using the Silver Standard to back their currency, the rupee. All this is to say, when a large portion of the global market holds a particular metal in high demand, this metal (silver) has the potential to generate good returns.
Platinum metals are used as materials to manufacture a range of devices and components, such as car parts, electroplating, dental crowns, jewelry and magnets. These uses create an ongoing and high demand for platinum. On the supply side, this metal is produced in small quantities with a limited number of sources. The limited supply of platinum coupled with a high ongoing demand makes for an investment with high earnings potential.
According to Bankrate.com, platinum prices in the marketplace typically follow gold’s prices and can even outsell gold when demand for platinum increases. Because of its unique supply/demand influences, platinum investments can hold their own in a portfolio and certainly work well as a diversification measure.
Palladium exists as a cousin to platinum metal as much of the material is found alongside platinum in raw ore deposits. In appearance, palladium has a silvery white surface that gives off a gold-colored cast as opposed to platinum’s shiny silver surfaces. Like platinum, palladium is also used as a raw material to manufacture a range of different products, such as LCD screens, computers, mobile phones and catalytic converters.
Not surprisingly, its existence alongside platinum makes for a limited global supply while its widespread use in the manufacturing realm creates a high demand for the metal. As an investment option, palladium has the potential for high returns as demand for the material conditions to grow.
Rare Coins Market
Rare coins –also known as ancient coins- originate from the ancient civilizations of Greece, Rome and Mesopotamia. Typically found in gold and silver, these pieces are valued for their rarity and intrinsic or numismatic value as ancient money. Rarity in and of itself has a considerable influence on value with the more ancient pieces being the most rare (and the most expensive). The standard for rarity is based on the Sheldon rarity scale, which classifies a rare coin as being only 1 of 75 in existence.
Unlike the other precious metals, the rare coins market is for the most part unregulated so investors really have to do their homework when considering each piece. As these pieces tend to gain in value over time, it’s important to approach rare coins as long-term investments in order to reap the best returns.
Within the precious metals market, bullion values are measured in terms weight and type of metal, so bullion can consist of any one of the four primary metals. Bullion pieces come in bars, ingots and rounds, which makes it easy for investors to choose from different price ranges. Much of the benefits with bullion have to do with how they’re valued as each piece or weight carries a set price value at time of purchase. This makes it easier to gauge how a particular investment is performing in the marketplace.
Because bullion is made from precious metals, they hold their value just like each individual metal does. This means investors can expect the same returns for bullion as they would for any of the precious metal commodities on the market. The consistency found in bullion pieces also makes them readily accepted for resale and easily converted to cash.
Precious Metals ETFs
Precious metals exchange-traded funds (ETFs) provide investors with ways to trade precious metals as commodities on the stock market. Many of these stocks are offered by the companies that mine precious metals. As exchange-traded funds, investors can buy and sell their shares on a day-to-day basis much like how stocks are traded. Precious metals ETFs can work well in cases where someone prefers short-term investments as opposed to longer-term holdings.
A precious metals ETF typically involves one type of metal, which may or may not generate healthy returns depending on the type of metal and market conditions. Investors looking for diversification may want to consider the types of funds that include two or more different metals inside the same ETF fund.
Recession Proof Effects
The Forex Empire News site reports the 2008 recession saw record numbers of new investors entering the precious metals market. Real estate value –once thought to be the next best safe haven after cash – saw devastating declines that had a crippling effect on the U. S. economy. These conditions further weakened the U. S. dollar and virtually bottomed-out the stock market leaving many with nothing to show for long-held investments and savings.
As no country in today’s world holds to the Gold (or silver) Standard, gold values remained intact as currency values declined. Likewise, silver, platinum and palladium not only held their value, but increased in value as the dollar declined. Unlike most other investment avenues, precious metals remain unaffected by market conditions and provide a hedge against declining dollar values.
The Monex Deposit Company
While the precious metals market offers a range of different investment opportunities, it’s no less important to know the ins and outs of the market in order to reap the best returns. The Monex Deposit Company has been an industry leader since 1967 as one of the first gold dealers in the precious metals marketplace.
Today, Monex operates as an international dealer inside a network of wholesalers, auction houses and distribution channels. In turn, Monex can offer investors a variety of products at affordable price ranges to accommodate those just starting out as well as the experienced investor. Whether investing in gold, silver, platinum or palladium, Monex provides full-service offerings to accommodate most any investor’s needs. Some of the services offered include:
• Investments accounts that average a four-to-one payout ratio
• Precious metal deliveries for bullion and coins
• Precious metals storage accounts
• Gold and silver coins
As a company with established industry experience, Monex investors can be assured their investments have the very best chance of performing well within any economic climate.
- http://www.nasdaq.com/article/protect-against-qe-with-these-precious-metal-etfs-etf-news-and-commentary-cm175523 – September 2012
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